By Callum Keown

Airline stocks have tumbled recently as the postelection rally has turned sour. But the scale and pace of the selling means there could be some opportunities out there.

Shares in U.S. airlines fell sharply Tuesday in response to fear that tariffs on Canada and Mexico, and slowing economic growth could hit travel demand. Cruise operators Royal Caribbean, Carnival and Norwegian Cruise Line Holdings fell for the same reasons.

But one travel stock in particular has been particularly hard hit lately. American Airlines' plunge Tuesday briefly triggered J.P. Morgan's "Down 30 in 30" trading rule. Although the shares recovered to close 3.8% down for the day and 21% down over the past month, at one point, the stock had lost 30% of its value in fewer than 30 days.

"This level of speed and severity has, in the past, overwhelmingly been followed by significant potential upside over the next 180 trading days, " analyst Jamie Baker said in a note Tuesday. "Never a guarantee of future performance, but this rule has served us well for decades," he added.

American Airlines stock has triggered the rule 22 times since 1998, J.P. Morgan analysts said, with returns of 50% or more in the following 180 days on 12 occasions. Only once did it fail to result in gains. The factors behind those falls include the Ebola virus, oil prices, global trade fears, and interest rates.

"It's always something. But the catalysts don't matter to us. For purposes of this analysis, it's solely about the correction," Baker said. "For risk-tolerant accounts, past precedent strongly suggests accumulating positions in Overweight-rated American."

United Airlines isn't far from meeting the rule as well, falling 21% over the past 30 days, the analysts said. A fall to $76.30 by March 21 would meet the threshold; the stock currently trades at around $86.

Airline and other travel stocks rallied in the week and months after President Donald Trump's election victory on hopes that the new administration would be friendlier to the sector. But as with the broader market, those hopes have turned to fears.

Deutsche Bank analyst Michael Linenberg said key indicators, such as credit-card data and changes in airlines capacity, "suggest demand may be entering a soft patch." However, Linenberg added he hasn't seen any signs of weakness in corporate or long-haul international travel.

That supports the view that American, as well as United and Delta Air Lines, could be set for a recovery because they are the most exposed to overseas travel. Deutsche Bank has Buy ratings on all three.

"We see full service carriers as better-positioned to weather the demand 'soft patch', particularly in light of their exposure to a more resilient and diversified customer base," Linenberg wrote.

Write to Callum Keown at callum.keown@barrons.com

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March 05, 2025 09:50 ET (14:50 GMT)

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